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MacNairs + Wilson

Report Reveals Expected Levels of Intergenerational Wealth Transfer

A new report has given an interesting insight into levels of wealth that is expected to transfer between generations over the next 30 years.

The report, by Sanlam UK, is based on research into three different sets of cohorts: over-55s with investable assets of £100,000 who are leaving their children and grandchildren an inheritance; people aged between 25-45 who are expecting to receive at least £50,000 in inheritance; and 200 UK-based independent financial advisers.

Inheritance Expectations

The report found evidence of high levels of inheritance expectations. More than 11 million people in the 25-45 age-group apparently expect to receive some sort of inheritance from either parents or grandparents. Around 5.1 million of them think they are in line to receive assets worth at least £50,000, and of these the mean average expected inheritance amounts to as much as £233,000.

“Our report highlights the scale of intergenerational wealth transfer that the UK is set to see over the next few decades,” commented Sanlam UK CEO, Jonathan Polin. “This level of inheritance is unprecedented, and its transfer presents both opportunities and challenges for the financial services industry and society more generally. That it comes at a time of societal, political and economic upheaval simply adds another element of complexity and uncertainty to an already extraordinary picture.”

Areas of Concern

In addition to revealing the levels of wealth expected to be passed on, the report also raises a number of concerns in relation to this transfer.

One such area of concern is that families still appear to find it very difficult to talk about inheritance planning. The research found that 38% of those who expect to receive an inheritance haven’t actually spoken about it with the gifting party and therefore are at risk of being left bitterly disappointed if the reality of their inheritance doesn’t match their expectations. If they are relying on the expected level of inheritance to boost their own finances, they also could be left financially vulnerable.

Despite the vast amount of wealth likely to be passed down between generations, the report nonetheless warns that those in line for inheritance could end up being over-reliant on their expected windfall. Almost a third (31%) of those 25-45-year-olds surveyed for the report admit they are putting off saving and “living in the now” because they know they have the money coming later down the line. A similar number (34%) said they will be reliant on their inheritance to help with their finances in the future.

Importance of Openness

Perhaps reflective of their generation’s more financially precarious position, the report also finds an alarming number in this group will be relying on inheritance to pay off debt. Indeed, almost a quarter (24%) of respondents said this will be one of the main uses of their inheritance – the third most commonly cited use for inheritance. Only purchasing a property (34%) and saving or investing came higher (38%). Other uses included setting up a trust (23%), starting a business (15%), and using it to retire early (17%).

The report has highlighted the importance for families to have full and frank conversations about inheritance, to help ensure younger generations have a realistic expectations of what they are to receive and can prepare accordingly.